Equity
In finance, equity refers to assets after the deduction of all liabilities. The remaining value after these deductions is what’s called equity.
For the shareholder or stockholders equity, investors generally look at their stake in the company, and the number of liabilities carried by the company.
In small-scale scenarios, equity could also refer to the personal finances of something. This is for example when someone owns a $1,000,000 home, but has a mortgage of $350,000 on it. That is then to say that the owner of the home has $650,000 equity on their property.
Equity can sometimes be a tricky measurement of wealth and financial well-being, as it can be both tangible and intangible.
Many people tend to invest tangible assets, those they can physically see and touch. Intangible assets are those you can not physically see, hold or touch.
What are tangible assets?
From an accounting perspective, tangible assets, for both businesses and personal wealth can include property, inventory, supplies, stocks, bonds, equipment, cash, accounts receivable, or land.
Those assets can be used as collateral against debt or can generate additional income for the owner.
What are intangible assets?
Some intangible assets can include copyrights, customers, patents, trademarks, and brand recognition.
What are liabilities?
Liabilities can be accounts payable, interest, loans, taxes, unearned revenue, warranties, or mortgages. These can be assigned to both companies or an individual depending on their financial position.
Usually, it is preferred to have a lower set of liabilities to ensure higher equity on your owned assets.
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2 Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]